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By Maria Panaritis
Latte-lovers shuddered yesterday to hear Starbucks was closing nine of its 115 cafés in the Philadelphia area among 600 nationwide. But, really, there was no need to panic.
Where one Starbucks is going under, it seems, another is just around the corner. And another, and another, and another.
Therein lies the problem that got Starbucks into this whole mess.
The Seattle company that transformed coffee from a mud-slurping morning routine to a daily luxury indulgence is now closing a big batch of outlets to stem losses.
It doesn't take an actuary to understand one reason why: location, location, location.
Three of the nine stores on the Starbucks hit list in the Philadelphia region are on Route 611 in Montgomery and Bucks Counties, two within a mile in Willow Grove.
There are so many around, it can be dizzying.
For example, in downtown Willow Grove, where Stephen Weinrich runs Weinrich's Bakery on Route 611, there is a Starbucks across the street from him in a bookstore, one in a nearby mall and one in a supermarket.
Then, there are two more near the naval air station up the road. And don't forget the two that are closing - on the 1100 and 2700 blocks of Route 611, he said.
"Anybody would take notice that they're just putting store after store after store in the same neighborhood," said Weinrich, 35, whose bakery has been a landmark in Willow Grove for 90 years.
When retailers open too many stores in a geographic area, they run the risk of "cannibalizing" their operations. That is, one store ends up eating into the sales of another.
"If it was new markets that they were expanding to, that's one thing," Weinrich said. "But they were just compounding their footprint here in existing markets."
As its shares have tumbled over the last year (they closed at $14.34 on the Nasdaq market yesterday, down from a 52-week high of $28.60), Starbucks has been criticized for becoming imprudent in choosing new-store locations.
The majority of the 600 stores slated for closure - 70 percent - were opened since 2006, the company said. Five of the nine closing in the Philadelphia area opened in 2006 or later.
Starbucks' over-expansion coincided with strategies by Dunkin' Donuts and McDonald's to step up the competition by introducing their own premium coffee brews.
"When you have some strategic stumbles and there's plenty of competition, that's when you're overcome," said Nancy Childs, professor of food marketing at St. Joseph's University.
Starbucks has become such a powerful part of people's everyday lives that the impending closures made headlines in cities nationwide yesterday. Such loyalty is not accidental.
The Starbucks business plan has been to make its coffee shops what the company likes to call a "third place" to its customers, Childs said.
"All of us have our home, and we have our work, but they have created our own 'third place' to go to," she said. "That's why you're getting this kind of possessive reaction."
The baristas who take coffee orders are encouraged to get to know regular customers by name and to remember their orders, Childs said.
"You don't what to lose that," Childs said. "That's like losing a friend."
An estimated 180 area Starbucks employees, however, will lose their jobs once the espresso machines are stored away.
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